Part 1 Revenue Application: Multi-Year Price Determination ... - Eskom

Overview of Multi-Year Price Determination
2013/14–2017/18 (MYPD 3)
Figure 8: NUS survey of advance industrial countries average electricity price (2012)
4.2 Impact on the economy
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Eskom is acutely aware that the proposed price increases will affect the country‟s economy.
The extent of this impact depends largely on how quickly the increases are phased in.
According to a 2011 study by the Pan African Investment and Research Services, the
negative effects of moving to cost-reflective prices can be significantly reduced by adopting a
gradual price path over the short term. This finding was echoed by a 2012 study by Deloitte,
which went further in its recommendations, stating that electricity prices should increase
towards cost reflectivity through three to four years of direct price increases – possibly
longer, if the electricity industry‟s sustainability and cash-flow considerations allowed for this.
The Pan African Investment and Research Services study further stated that the electricity
price levels and the path chosen to achieve them have the potential to shape the economy in
favour of certain industries over others. For instance, businesses that are energy intensive,
have small profit margins or rely on inflexible production technologies will be harder hit than
those that use less energy, are able to adopt energy-efficient technologies or have larger
profit margins.